Federal Budget 2026-27: Superannuation and retirement considerations 

• CGT and negative gearing reforms may increase the strategic value of super: Changes to capital gains tax and property investment settings are likely to reshape how individuals structure assets between super and non-super environments, particularly for growth and property investments.  
• Implementation and compliance now take priority over new reform: With Payday Super, higher contribution caps and expanded regulatory oversight moving into operational phases, funds, employers and members face a more complex and compliance-driven superannuation landscape.  
• Member outcomes:  In this environment, a clear understanding of both policy direction and individual circumstances will be critical to maximising retirement outcomes.  

The 2026-27 Federal Budget does not change the direction of Australia’s superannuation system - moving toward a more targeted, equity-driven framework while pausing further structural reform.

Following a period of significant policy change, the government has used this Budget to reinforce its superannuation position, referencing recent reforms and signalling a broader intent to address wealth inequality and intergenerational fairness.

Unlike previous years, the Budget introduces no new superannuation measures, reflecting the fact that substantial reforms have already been legislated and are now in the implementation phase.

These include:

• The introduction of Payday Super from 1 July 2026
• Superannuation payments on Paid Parental Leave
• Expanded compliance and enforcement measures.

Instead, the Budget builds on these changes by reinforcing a clear policy narrative -  superannuation tax concessions are becoming more targeted.

This is most evident in the recently legislated changes to:

• Reduce tax concessions for earnings on superannuation balances above $3 million
• Introduce an additional tier of tax for earnings on balances above $10 million
• Expand the Low Income Super Tax Offset (LISTO), increasing both eligibility thresholds and maximum payments.

While not new announcements, these measures underpin the government’s broader objective of improving equity across the system.

Taken together, these reforms signal a structural shift away from a flat concessional superannuation system toward a more progressive model.

Higher-balance members face increased tax on earnings, while lower-income earners will receive enhanced offsets, effectively reducing or eliminating tax on their contributions.

This reflects a broader principle: superannuation should provide a tax advantage relative to an individual’s personal tax rate, regardless of income level.

For policymakers, this approach is positioned as a way to:

• Address wealth concentration within the super system
• Improve retirement outcomes for lower-income earners
• Reinforce confidence in the fairness of the system.

However, the challenge with any tax changes to a long-term savings vehicle will be to ensure members remain confident in the underlying system. The system relies on Australians being confident in the policy settings for their long-term savings and believing that the goal posts won’t move mid-game.  

While not a direct superannuation measure, the Budget’s proposed changes to capital gains tax (CGT) introduce an important consideration for retirement strategy.

Individuals, trusts and partnerships will no longer be allowed a 50% discount on capital gains from investments. Instead, they will use an inflation-linked cost base to calculate the taxable gain and will pay a minimum 30% tax rate on these gains. These changes will not apply to superannuation funds, which will continue to use the 1/3^rd discount method in the accumulation phase and apply concessional superannuation tax rates.

Further tax reform includes the removal of negative gearing for residential property investments from 1 July 2027. Exemptions apply for assets purchased prior to budget night, but also for superannuation funds, including SMSFs.

“The reforms to negative gearing and CGT are prospective and respect previous investment decisions and will not impact the main residence CGT exemption or superannuation tax arrangements. The Government will consult with stakeholders on key details of the capital gains tax reforms, including the treatment of early-stage and start-up businesses given the unique features of the tech and start-up sector.”¹

This has several key implications:

• The introduction of 30% minimum tax on capital gains outside of super means that superannuation tax concessions will be more valuable for earnings derived from capital gains.
• It may influence how individuals allocate assets between super and non-super environments, particularly for growth-oriented investments.
• Property investment may become relatively more attractive within SMSF in future.

More broadly, the combination of CGT reform and superannuation tax changes signals a consistent policy direction: a move toward more targeted tax concessions across wealth creation and retirement savings.

While the direction of policy is clear, it introduces greater complexity - particularly for those with higher balances.

The recent superannuation policy changes coupled with the broader budget tax changes outside of superannuation raise new considerations around:

• The relative attractiveness of superannuation versus alternative investment structures
• The timing and structure of contributions and withdrawals
• The long-term role of super within broader wealth strategies.

As a result, there is likely to be:

• Greater reliance on financial advice
• Increased need for active planning and strategy
• More nuanced engagement with superannuation as a wealth vehicle.

The Budget does contain measures to strengthen the resilience of superannuation operators to counter fraud and cyber threats with additional resourcing of key regulators.

As well, just prior to the Budget, the Government announced consultation on measures to adjust the performance test to remove unintended impediments to super funds in their investment decisions and design of investment options.  The measures for changes to the performance test would provide expanded options for assessing the merits of superannuation fund investments. Rather than simply measuring the performance against a reference asset allocation benchmark, the proposals would allow a more nuanced consideration of trustee investment strategies and decisions. This could include adjustment of the test for emerging or alternative asset classes and introducing a separate assessment of risk adjusted return.

The 2026-27 Budget and other recent changes reinforce a more targeted and policy-driven superannuation system.

Key considerations include:

• More targeted concessions: Reduced benefits at the top end and increased support at the lower end
• Shifting investment dynamics: Changes to CGT may influence how assets are structured across super and non-super portfolios leading to increased complexity.
• Focus on implementation: With existing reforms now moving into operational phases.

It is also to be noted that key superannuation caps will increase through previously legislated indexation measures from 1 July 2026:

• Concessional contributions cap increases from $30k to $32.5k pa.
• Non concessional contributions cap increases to $130k with the three-year bring forward limit rising to $390k
• The pension Transfer Balance Cap increases from $2m to $2.1m

The 2026-27 Budget confirms that superannuation policy is entering a new phase - one defined less by expansion and more by targeting, equity and system sustainability.

For members and funds, the direction is clear:

• The value of superannuation remains strong, but more differentiated
• The interaction between super and broader tax settings will play a growing role in long-term outcomes and strategic decision-making

In this environment, a clear understanding of both policy direction and individual circumstances will be critical to maximising retirement outcomes.

^{Prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 (Mercer Australia). References to ‘Mercer’ shall be construed to include Mercer Australia and/or its associated companies.}

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